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what is mean by work in process and work in progress what is the difference between these two things give some practical examples
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| Both terms are often used interchangeably, but in accounting and manufacturing contexts there is a subtle distinction: 1. Work in Process (WIP): Refers to goods that are partially completed within a continuous/flow manufacturing environment. The transformation is rapid and items move quickly from one stage to the next. Example: A car assembly line where engine, body, and interiors are being fitted simultaneously — at any point, multiple cars are in various stages of completion. 2. Work in Progress: Broader term used in project-based or long-duration work where completion spans a longer time period. More common in construction, software, or custom orders. Example: A multi-storey building under construction or a long-term infrastructure project. 3. Accounting Treatment (Ind AS/GAAP): Both are shown under Inventories in the balance sheet. Valued at cost incurred to date (raw material + labour + overheads allocated). For long-term construction contracts, Ind AS 115 (Revenue from Contracts with Customers) governs how and when revenue is recognized, and the balance shows as Contract Asset / WIP. 4. Practical Examples: - Furniture manufacturing mid-assembly = Work in Process - A road construction project 60% complete = Work in Progress - Audit report half-drafted = Work in Progress (in a CA firm context) In practice, both terms are used synonymously and ICAI study material uses 'Work in Process' for manufacturing and 'Work in Progress' for service/project-based contexts. |
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